Reining in Requirements on Compound Medications

Compound medications, or compounding, is the process of creating a custom medication to treat a patient’s individual medical condition. To create a compound, a physician will write a compound prescription, which lists the exact amount and combination of drugs to be used to meet a patient’s needs. The prescription is then sent to the pharmacy, who creates the compound drug. Some compound prescriptions require a special compounding pharmacy to create, while others can be made in a licensed pharmacy – it all depends on the combination of ingredients and goal of the product.

The recent focus of personalized medicine in health care has also made its way into workers' compensation. Compounds allow a doctor and pharmacist to account for a patient’s allergies, dosage requirements, and patient limitations, such as inability to swallow a pill.

Over the last few years, compounded medications have more than tripled and the list of ingredients in a single prescription continues to grow. This combination has led many states to consider how best to handle compounds.

Some states, such as Colorado and South Carolina, require compounds to be billed based on the amount of each individual ingredient it contains. While other states, like Ohio, have placed caps on reimbursements for compounds—no matter how many ingredients it includes, the max reimbursement for the compound is set.

Most recently, Texas Department of Insurance (TDI) has focused intently on reigning in compound costs and the inappropriate use of compounds. Back in June TDI and the Department of Workers’ Compensation (DWC) released a compound report that found that between 2010 and 2014, the percent of pharmacy spend for compounds increased from 1.6% to 3.2%, and while the number of compound scripts between 2014 and 2016 decreased, it still remained at 3.2% of total pharmacy spend in workers’ comp. As of 2016, compounds total costs were $11 million.

After months of discussion on how to best control these costs, TDI released proposed rules earlier in January that would remove all compound medications from the state’s drug formulary. Under the rules, all compounds would require prior authorization before being filled by a pharmacy. The change in rule would also require a doctor to prove the medical necessity of a compound before a patient could access it. This is TDI’s attempt to better manage the use of compounds and reduce abuse and unnecessary use of a costly medical treatment. TDI will hold a hearing in February before releasing a final rule for later this year.